<Specification and Estimation of Production Risk, Risk Preferences and Technical ffciency>

Subal C. Kumbhakar

This article deals with speci?cation and estimation of risk preferences, production risk, and technical inefficiency. It makes contribution in three separate areas of production economics.

First, we model producers’ attitude toward risk and derive risk preference functions (without assuming any parametric form of the utility function and any distribution of the error term representing production risk) when risk arises from production uncertainty and technical inef?ciency.

Second, the standard production risk model is extended to accommodate technical inef?ciency and producers’attitude toward risk. Finally, the technical ef?ciency model is generalized to accommodate production risk and producers’ attitude toward risk.

Key words: frontier, production risk, risk preference function, technical efficienc